Daily Currency Update

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The Loonie loses due to the biggest one-day price plunge of crude oil.

CAD - Canadian Dollar

Crude oil suffered its biggest one day price fall and reached a 21-year low. At one point, it fell around 40 percent below US$ 11 a barrel, even in spite of the deal the OPEC made a week ago. The reality is that it is just a classic case of excess supply and insufficient demand, which has been exacerbated by the lack of storage capacity. Therefore, the Loonie is losing big versus all the majors, especially against the Aussie dollar and Kiwi dollar (by 0.96 and 0.58 percent respectively). The North American equity market is usually correlated with the Loonie; both are falling this morning. The FX pair that sticks out is the USD/CAD, which trades at 1.4063, representing a 0.50 percent increase (weaker Loonie). Technically speaking, some support levels are 1.4058, 1.4019, and 1.3981. At the same time, some resistance levels are 1.4106 and 1.4183.

It seems as though the market has become overly optimistic recently, especially given the high uncertainty, lack of current economic activity, and negative economic outlook. Lock downs seem to be working, but infections are still much higher these days compared with when countries decided to shut down. For now, it appears that a cure is the only hope to restore the pre-virus levels of economic activity. The market continues to play headlines in the short-term and volatility is still elevated.

Key Movers

In Europe, Merkel advised against moving too quickly to ease the lock down. The EUR/USD pair trades flat at 1.0880, which is the same as last Friday’s close.

The Brexit proxy EUR/GBP, which is trading at 0.8746 at this moment, appears to be distorted, considering the recent pandemic and the Brexit headlines taking the backseat for now. It appears that the most likely outcome surrounding the proposed Brexit trade deal date with the E.U. will be postponed, delaying the downside risk to the GBP. On the back of this, we may see more favourable terms given to the U.K. as there is more time to negotiate. Additionally, if the coronavirus fallout worsens, it is likely that the E.U. will not be in a position of power to delay negotiations further at the expense of an already fragile economy.

Expected Ranges

USD/CAD: 1.4019 - 1.4106 ▲

EUR/CAD: 1.5220 - 1.5379 ▲

GBP/CAD: 1.7475 - 1.7476 ▲

AUD/CAD: 0.8950 - 0.9060 ▲

NZD/CAD: 0.8517 - 0.8569 ▲

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